China's Passenger Cars Leave U.S. in the Dust

The Big Three of Detroit (Ford, General Motors and Chrysler), long a symbol of American industry, no longer rule the roads. China surpassed the United States in passenger car production for the first time ever in 2006 producing 5.2 million cars, while the US made 4.4 million, the Financial Times reported citing a Bank of America report.

The figures are remarkable considering that in 1997 China’s car output was at 5.4% of US levels and in less than seven years their production skyrocketed to 118% of US levels.

But recent lagging production is not the only thing changed about the Big Three: In 1998 Chrysler was taken over by a German company Daimler-Benz becoming DaimlerChrysler.

Now all three companies, including the remaining American Big “Two,” are floundering. Ford lost more than a billion dollars in 2005 and subsequently announced it would be eliminating up to 30,000 North American jobs by 2012. General Motors Corporation lost $10.6 billion from 2005-2006 and plans eliminate 30,000 North American jobs by the end of 2008. DaimlerChrysler is set to cut 13,000 North American jobs by 2009.

Insourcing has lead to a surge of international dominance in the American automotive market. Foreign competition currently controls 39% of the US market in terms of domestically-owned production. Foreign ownership of the US market is now over 59%.

Despite “free trade” agreements promising increased exports, America has been ineffective in penetrating foreign markets and as a result US balance of trade continues to set record yearly deficits. The automotive market numbers reflect this free trade inequity: American shares of the Japanese auto market are around 1% according to Canada’s industrial research council.

The massive fiscal and job losses coupled with steep foreign competition is now relegating the nation that perfected the assembly line to the sidelines of automotive production. The loss of US’s once proud car production primacy is emblematic of the paradox of America’s depleted and outsourced manufacturing base of today.

How long can Silicon Valley thrive yet continue to import 59% of its computer equipment? Who holds the real power when American shoe giants like Nike and New Balance import 90% of their footwear?

This country, built on production and industry, is now exclusively a consumption and debt-laden paper-tiger, steering both the automotive industry and the country’s future down a road of bleak trade trends and deteriorating economic prospects.